Business
Three ‘hard truths’ about Canada’s trade

From the Fraser Institute
Author: Jock Finlayson
In Canada’s case, a small number of sectors reliably generate significant trade surpluses, which help finance large trade deficits incurred in other parts of our economy.
Canada is an “open” economy that depends on cross-border flows of trade, investment and data/knowledge to maintain high living standards. To pay our way in a very competitive world, Canadians must produce and sell goods and services to customers in other countries. These exports furnish the means to pay for the vast array of imports that contribute to the well-being of Canadian households and allow our businesses to operate efficiently and grow by accessing bigger markets.
In 2022, Canada exported $779 billion of goods to other countries, along with $161 billion of services, for a total of $940 billion. The services category includes a wide array of commercial services including professional, scientific, technical, digital and financial, as well as transportation services and international tourism (when non-Canadian visitors travel to spend money here).
About three-quarters of Canada’s exports are destined for a single market—the United States, whose economy has steadily expanded in size over time to reach some US$25 trillion of gross domestic product today. Canada also sources the bulk of our imports from the U.S.
The centrality of the American market to Canada’s economic prosperity is the first “hard truth” about Canada’s trade, a point explored in a recent paper by Steve Globerman. Despite periodic efforts to diversify Canada’s trade and commercial links over the last 50 years, Canada remains as closely tied to the American economy today as we were in the 1990s. There’s little reason to believe the Trudeau government’s recently unveiled “Indo-Pacific” strategy will change the situation. Proximity, a common language and business culture, and the impact of extensive and unusually deep business and personal ties all serve to reinforce the American-centric character of Canada’s trade. It follows that the U.S. should continue to figure prominently in the trade promotion and investment attraction activities of Canadian governments.
A second “hard truth” about Canada’s trade is the outsized place of natural resource-based products in the export mix. The first table below breaks down Canada’s goods and services exports in 2022 into the main groupings.
Added together, energy, non-metallic minerals and related products, metal ores, forest products and agri-food comprise almost half of the country’s total international exports of goods and services combined. Energy alone supplied 27 per cent of Canada’s merchandise exports (and 23 per cent of total exports) last year, generating a remarkable $212 billion in export-driven income for Canadian businesses, workers and governments.
Within the energy basket, oil and oil-based products dominate, providing about three-quarters of energy-based export revenues. Contrary to innumerable speeches and press releases issued by the current federal government, the energy share is likely to rise in the next several years, as LNG production from British Columbia comes on-line and Western Canadian oil exports increase following the completion of pipeline expansion projects.
The final “hard truth” is closely related to the second but carries a more nuanced message. Ultimately, every country will have a ledger showing the trade surpluses and trade deficits across its various industries. In Canada’s case, a small number of sectors reliably generate significant trade surpluses, which help finance large trade deficits incurred in other parts of our economy.
The second table provides a snapshot of Canada’s trade “balances”—the mix of deficits and surpluses by broad industry category.
The story is a fairly simple one; positive trade balances in the energy, mining, forestry and agri-food sectors offset chronic—and in some cases very sizable—trade deficits in consumer goods, chemicals and plastics, motor vehicles/parts, and industrial and electronic goods. We also run a smallish deficit in our overall services trade.
The trade data are informative. Among other things, they tell us where Canada has, in the language of economists, a “comparative advantage” in the global context. For a market-based economy, a pattern of positive trade balances is evidence that it very likely enjoys a comparative advantage in the industries which report consistent trade surpluses. Armed with such information, smart policymakers should strive to create and sustain an attractive business and investment climate for the industries that produce trade surpluses. Unfortunately, this is a lesson that today’s federal government in distant Ottawa has struggled to digest.
Business
It Took Trump To Get Canada Serious About Free Trade With Itself

From the Frontier Centre for Public Policy
By Lee Harding
Trump’s protectionism has jolted Canada into finally beginning to tear down interprovincial trade barriers
The threat of Donald Trump’s tariffs and the potential collapse of North American free trade have prompted Canada to look inward. With international trade under pressure, the country is—at last—taking meaningful steps to improve trade within its borders.
Canada’s Constitution gives provinces control over many key economic levers. While Ottawa manages international trade, the provinces regulate licensing, certification and procurement rules. These fragmented regulations have long acted as internal trade barriers, forcing companies and professionals to navigate duplicate approval processes when operating across provincial lines.
These restrictions increase costs, delay projects and limit job opportunities for businesses and workers. For consumers, they mean higher prices and fewer choices. Economists estimate that these barriers hold back up to $200 billion of Canada’s economy annually, roughly eight per cent of the country’s GDP.
Ironically, it wasn’t until after Canada signed the North American Free Trade Agreement that it began to address domestic trade restrictions. In 1994, the first ministers signed the Agreement on Internal Trade (AIT), committing to equal treatment of bidders on provincial and municipal contracts. Subsequent regional agreements, such as Alberta and British Columbia’s Trade, Investment and Labour Mobility Agreement in 2007, and the New West Partnership that followed, expanded cooperation to include broader credential recognition and enforceable dispute resolution.
In 2017, the Canadian Free Trade Agreement (CFTA) replaced the AIT to streamline trade among provinces and territories. While more ambitious in scope, the CFTA’s effectiveness has been limited by a patchwork of exemptions and slow implementation.
Now, however, Trump’s protectionism has reignited momentum to fix the problem. In recent months, provincial and territorial labour market ministers met with their federal counterpart to strengthen the CFTA. Their goal: to remove longstanding barriers and unlock the full potential of Canada’s internal market.
According to a March 5 CFTA press release, five governments have agreed to eliminate 40 exemptions they previously claimed for themselves. A June 1 deadline has been set to produce an action plan for nationwide mutual recognition of professional credentials. Ministers are also working on the mutual recognition of consumer goods, excluding food, so that if a product is approved for sale in one province, it can be sold anywhere in Canada without added red tape.
Ontario Premier Doug Ford has signalled that his province won’t wait for consensus. Ontario is dropping all its CFTA exemptions, allowing medical professionals to begin practising while awaiting registration with provincial regulators.
Ontario has partnered with Nova Scotia and New Brunswick to implement mutual recognition of goods, services and registered workers. These provinces have also enabled direct-to-consumer alcohol sales, letting individuals purchase alcohol directly from producers for personal consumption.
A joint CFTA statement says other provinces intend to follow suit, except Prince Edward Island and Newfoundland and Labrador.
These developments are long overdue. Confederation happened more than 150 years ago, and prohibition ended more than a century ago, yet Canadians still face barriers when trying to buy a bottle of wine from another province or find work across a provincial line.
Perhaps now, Canada will finally become the economic union it was always meant to be. Few would thank Donald Trump, but without his tariffs, this renewed urgency to break down internal trade barriers might never have emerged.
Lee Harding is a research fellow with the Frontier Centre for Public Policy.
2025 Federal Election
Carney’s budget is worse than Trudeau’s

Liberal Leader Mark Carney is planning to borrow more money than former prime minister Justin Trudeau.
That’s an odd plan for a former banker because the federal government is already spending more on debt interest payments than it spends on health-care transfers to the provinces.
Let’s take a deeper look at Carney’s plan.
Carney says that his government would “spend less, invest more.”
At first glance, that might sound better than the previous decade of massive deficits and increasing debt, but does that sound like a real change?
Because if you open a thesaurus, you’ll find that “spend” and “invest” are synonyms, they mean the same thing.
And Carney’s platform shows it. Carney plans to increase government spending by $130 billion. He plans to increase the federal debt by $225 billion over the next four years. That’s about $100 billion more than Trudeau was planning borrow over the same period, according to the most recent Fall Economic Statement.
Carney is planning to waste $5.6 billion more on debt interest charges than Trudeau. Interest charges already cost taxpayers more than $1 billion per week.
The platform claims that Carney will run a budget surplus in 2028, but that’s nonsense. Because once you include the $48 billion of spending in Carney’s “capital” budget, the tiny surplus disappears, and taxpayers are stuck with more debt.
And that’s despite planning to take even more money from Canadians in years ahead. Carney’s platform shows that his carbon tariff, another carbon tax on Canadians, will cost taxpayers $500 million.
The bottom line is that government spending, no matter what pile it is put into, is just government spending. And when the government spends too much, that means it must borrow more money, and taxpayers have to pay the interest payments on that irresponsible borrowing.
Canadians don’t even believe that Carney can follow through on his watered-down plan. A majority of Canadians are skeptical that Carney will balance the operational budget in three years, according to Leger polling.
All Carney’s plan means for Canadians is more borrowing and higher debt. And taxpayers can’t afford anymore debt.
When the Liberals were first elected the debt was $616 billion. It’s projected to reach almost $1.3 trillion by the end of the year, that means the debt has more than doubled in the last decade.
Every single Canadian’s individual share of the federal debt averages about $30,000.
Interest charges on the debt are costing taxpayers $53.7 billion this year. That’s more than the government takes in GST from Canadians. That means every time you go to the grocery store, fill up your car with gas, or buy almost anything else, all that federal sales tax you pay isn’t being used for anything but paying for the government’s poor financial decisions.
Creative accounting is not the solution to get the government’s fiscal house in order. It’s spending cuts. And Carney even says this.
“The federal government has been spending too much,” said Carney. He then went on to acknowledge the huge spending growth of the government over the last decade and the ballooning of the federal bureaucracy. A serious plan to balance the budget and pay down debt includes cutting spending and slashing bureaucracy.
But the Conservatives aren’t off the hook here either. Conservative Leader Pierre Poilievre has said that he will balance the budget “as soon as possible,” but hasn’t told taxpayers when that is.
More debt today means higher taxes tomorrow. That’s because every dollar borrowed by the federal government must be paid back plus interest. Any party that says it wants to make life more affordable also needs a plan to start paying back the debt.
Taxpayers need a government that will commit to balancing the budget for real and start paying back debt, not one that is continuing to pile on debt and waste billions on interest charges.
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